Turkiye’s credit profile is characterized by its weak fiscal position, very high inflation levels, large external financing needs, and weak institutional framework. Moreover, there are material macro risks emancipating from widening twin deficits. Despite these negatives, Turkiye benefits from having a moderate economic profile and favourable demographic dynamics.

Post his re-election in 2023, President Erdogan returned to conventional monetary policy in order to address the prevailing macro-economic imbalances. This is demonstrated by an increase in interest rates to 50% from 8.5% in a span of a year and half and steps to tighten credit availability by the central bank. The government has also increased taxes on fuel and standard vat rates to bring down fiscal deficits. Going forward, the impact of such monetary and fiscal tightening on Turkiye’s growth will be a key monitorable. Rising geo-political tensions too remain a concern.